Optorun Co., Ltd.

August 10, 2018

Earnings AnnouncementFor the First Half of the Fiscal Year

Ending December 2018

Index

I. Outline of the financial results

Ⅱ. Appendix

1

P 2

P 11

2

● Financial Highlights (consolidated)● Orders Received and Order Backlog● Net Sales● Net Sales by Categories● Operating Profit● Research and Development Expenses● Balance Sheet● Cash Flows

3

1H FY12/2017 1H FY12/2018 Growth

Net sales 8,971 21,811 +143.1%

Gross profit 4,009 8,985 +124.1%Gross profit

margin 44.7％ 41.2% ―

Operating profit 1,750 5,425 +210.0%

Operating margin 19.5% 24.9% ―

Ordinary profit 1,733 5,719 +229.9%Profit attributable to

owners of parent 819 3,972 +385.0%

Big increases in sales and earningsHigher sales of optical thin film coaters in the smartphone and LED sectors; coaters for surveillance camera lenses and IoT applications (biometric authentication, automotive components, etc.) are major sources of growth.Negative impact of U.S.-China trade friction and low stock prices in China was small; close ties with customers are essential as their demands increase for more advanced film formation technologies and faster deliveries.

Financial Highlights (Consolidated)

(Million yen)

4

10,672

36,574

52,527

23,939

3,500

25,171

44,169 46,298

0

10,000

20,000

30,000

40,000

50,000

60,000

2015/12 2016/12 2017/12 2018/12

Orders Received Order Backlog

1H

Orders Received and Order Backlog

(Million yen)

Vacuum deposition equipment is 70% of orders and sputtering coaters is 30%, pointing

to growth of the equipment category

SmartphonesLarge volume of orders in China, Korea and other East Asian countriesStrong orders for coaters for 3D and glass back covers

Camera lensesMore growth in orders for high-performance coaters from Chinese surveillance camera manufacturers

Biometric authenticationIncrease in orders involving 3D (facial) authentication

AutomobilesIncrease in orders involving cameras and sensor panels

5

15,278 14,903

33,385

0

10,000

20,000

30,000

40,000

2015/12 2016/12 2017/12 2018/12

1H FY178,971

1H FY1821,811

+143.1％

Net Sales

(Million yen)

• Higher sales for smartphone applications to manufacturers in North America as well as in China and Korea; strong demand for decorative coatings for smartphone 3D and glass backings

• Sales divided evenly between smartphones and all other categories→ Increase in sales involving surveillance

cameras, the IoT and LEDs

Camera lenses (surveillance)Increase in sales to surveillance camera manufacturers in ChinaIoT (biometric authentication)Increase in sales for 3D (facial) authenticationIoT (automobiles)Increase in sales involving cameras, sensors and LCD screensLEDsThe LED lighting market is growing and potential growth of the market for micro-LEDS has increased significantly

74.2 9.1

8.2

4.1 4.4 ％

50.3

16.4

20.5

6.2 6.6 Smartphone

camera lense

IoT

LED

Other

Biometric authentication, automobiles

6

1H FY2018

21,811Million yen

Full year FY2017

33,385million yen

The growth of applications for optical thin filmsMany companies in North America, China, Korea, etc. require coaters for smartphone applications. Other market sectors are growing too, particularly surveillance camera lenses, the IoT (biometric

authentication, automobiles) and LEDs. Demand for coaters is strong as a result.

Net Sales by Categories

7

1. Sales of sputtering coaters in North America, China and Korea contributed to earnings.

2. Higher sales of vacuum deposition equipment also contributed to earnings growth.

3. Use of outsourcing to cut time used at factories for production processes raised the volume of products shipped.

2,435 2,380

7,327

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2015/12 2016/12 2017/12 2018/12

1H FY171,750

1H FY185,425

+210.0％

Operating Profit

(Million yen)

8

666 716

2,466

3,400

4.44.8

7.4 7.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2015/12 2016/12 2017/12 2018/12

R&D expenses R&D to sales (RHS) (%)

1. Using resources for R&D is the highest priority due to the reliance of Optorun on R&D activities.

2. Reinforced the R&D infrastructure consisting of the Japan head office and operations in China and Taiwan and increased the R&D workforce.

3. Focusing on new smartphone functions, increasing speed of IoT sector progress (biometric authentication, automotive use), increasing performance of surveillance cameras and LEDs, and equipment that combines semiconductor and optical technologies（E）

1H FY17721

1H FY181,603

+122.3％

Research and Development Expenses

(Million yen)

9

Dec. 31 2017 June 30 (1H FY2018)Amount % Amount % Change

Current assets 52,255 92.6% 52,316 91.8% ＋60Cash and deposits 19,893 35.3% 11,022 19.3% (8,871)

Notes and accounts receivable - trade 3,380 6.0% 8,088 14.2% ＋4,707

Inventories 25,107 44.5% 30,012 52.7% ＋4,904Allowance for

doubtful accounts (181) (0.3)% (392) (0.7)% (210)

Other 4,055 7.2% 3,585 6.3% (469)Non-current assets 4,169 7.4% 4,682 8.2% ＋512Total assets 56,425 100.0% 56,998 100.0% ＋573Current liabilities 32,038 56.7% 30,096 52.8% (1,941)

Notes and accounts payable - trade 7,303 12.9% 4,928 8.6% (2,375)

Short-term interest-bearing debt 9,193 16.3% 5,366 9.4% (3,827)

Other 15,541 27.5% 19,802 34.7% +4,260Non-current liabilities 1,780 3.2% 2,224 3.9% ＋444

Long-term interest-bearing debt 432 0.8% 331 0.6% (101)

Other 1,347 2.4% 1,893 3.3% ＋545Total liabilities 33,818 59.9% 32,321 56.7% +1,497Total net assets 22,606 40.1% 24,677 43.3% ＋2,070Total liabilities and net assets 56,425 100.0% 56,998 100.0% ＋573

Inventory growth and repayment of debt

Increase in retained earnings

Increase in advances along with growth in orders

Balance Sheet(Million yen)

10

1H FY2017 1H FY2018Major factors

Amount Amount Change

Cash flows from operating activities (6,425) (2,304) +4,121

• Increase in net income• Increase in advances along

with growth in orders

Cash flows from investing activities (2,062) (926) +1,136 • Cash used for investments

increased

Cash flows from financing activities 8,626 (5,413) (14,040)

• Repayments of short-term loans payable

• Dividend paymentsEffect of exchange rate

change on cash and cash equivalents

(18) (226) (208)

Net increase (decrease) in cash and cash equivalents 119 (８,871) (8,990)

Cash and cash equivalents at beginning of period 5,357 19,893 +14,536

Cash and cash equivalents at end of period 5,477 11,022 ＋5,545

Cash Flows

(Million yen)

11

● Forecast for FY12/2018 (Consolidated)● Shareholder Distributions● FY2020 Target (Medium-term management plan

2018-2020)

12

FY12/2017(Actual)

FY12/2018(Forecast) Change

Net sales 33,385 43,800 +31.2%

Operating profit 7,327 8,100 +10.5%

Operating margin 21.9% 18.5% ―

Ordinary profit 7,095 8,200 +15.6%Profit attributable to

owners of parent 4,815 5,700 +18.4%

Forecast for FY12/2018 (Consolidated)

(Million yen)

In 2018, we anticipate a continuation of demand for high-performance optical thin film coaters as new smartphones continue to add more advanced capabilities. The reduction in smartphone output early in 2018 will probably have only a small negative effect.

In the LED sector, we expect orders for film coaters to remain strong for lighting products and LEDs used in smartphone biometric authentication systems.

We also foresee growth in orders for automotive applications, including cameras, proximity sensors to prevent collisions, head-up displays and other products.

Continuing progress involving the IoT will probably broaden demand for optical thin film coating used to make lenses and optical sensors.

Shareholder Distributions

13

モルガン・スタンレー

The policy is maintain sufficient funds for R&D activities, strengthening manufacturing operations, starting new businesses and other requirements and to use remaining funds as much as possible for shareholder distributions.

The goal is consistent dividend payments with a consolidated payout ratio of about 30%.

Dividend Policy

Consistently returning earnings to shareholders

6.7 9.3

40 42 16.0

22.7

29.7 30.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2015/12 2016/12 2017/12 2018/12

Dividend per sharePayout ratio (RHS)

(%)(Yen)

* There was a 1-to-1,000 share split on March 18, 2017 and a 1-to-3 share split on October 13, 2017. Earnings per share in 2015, 2016 and 2017 have been adjusted to reflect these stock splits.

（E）

FY2020 Target (Medium-term management plan 2018-2020)

14

33,385

52,700

7,327 10,400

0

10,000

20,000

30,000

40,000

50,000

60,000

2017/12 2020/12

Sales Operating profit(Million yen)

Sales & Operating profit

Use strengths as a company with highly advanced technology development skills to speed up R&D for the creation of thin film formation equipment with new capabilities.

Leverage aggregate business capabilities that rank among the best in the world by building a stronger infrastructure for the unified management of activities (R&D, production, sales, administration) in Japan, Shanghai and Taiwan.

Strategic priorities

1

2(Target)

Disclaimer, Precautions and Inquiries

15

This presentation was prepared by using assumptions based on economic, social and other conditions as of August 10, 2018 and the reasonable judgments of management. The information in this presentation may be revised without prior notice in the event of a change in the business climate or some other event.This presentation contains forward-looking statements. These statements incorporate assumptions that reflect current outlooks, forecasts and risk factors. There are many uncertainties that may cause actual performance to differ from these statements.These risk factors and uncertainties include, but are not limited to, industry and market conditions, changes in interest rates and exchange rates, and other items associated with the Japanese economy and global economy.Even if there is new information, a future event or some other item that affects the outlook, Optorun has no obligation to update or revise the forward looking statements in this presentation.Inquiries

E-mail：ir-info@optorun.co.jp TEL：049-239-3381